Virginia Contractors Plead Guilty to Kickback Scheme

U.S. Department of Justice
October 18, 2011

Office of Public Affairs(202) 514-2007/TDD (202) 514-1888

WASHINGTON—Two Virginia contractors pleaded guilty today to participating in a scheme to steer contracts for repair and maintenance work at health care and nursing home facilities owned by Medical Facilities of America Inc. (MFA) to their now defunct plumbing business, the Department of Justice announced.

Donald R. Holland, a resident of Hardy, Va., and Larry R. Sumpter, a resident of Roanoke, Va., pleaded guilty in U.S. District Court in Roanoke to conspiring with another individual to steer contracts for repair and maintenance at MFA healthcare and nursing home facilities. According to a one-count felony charge filed today, from about June 1998 until at least December 2006, Holland and Sumpter, former co-owners of Virginia-based Hardy Plumbing & Heating Corp., conspired with an MFA employee who oversaw the bidding process for repair and maintenance contracts at MFA facilities in North Carolina and Virginia. The department said that the MFA employee steered contracts to Hardy Plumbing in return for kickbacks.

According to the court documents, Holland, Sumpter, and the MFA employee created fictitious competitor bids that were higher than the quotes submitted by Hardy Plumbing to create the appearance of competition. The MFA employee also specified the amount Hardy Plumbing should quote to MFA as well as the amount of the kickback on each of the contracts. As a result of the kickback scheme, Holland and Sumpter paid more than $250,000 to the MFA employee and received gross revenues totaling more than $3 million in connection with MFA contracts that were subject to the scheme to defraud. The department said that as a result of the kickback scheme, MFA was deprived of competitive pricing to its financial detriment. According to the plea agreements, Holland and Sumpter have agreed to cooperate with the department’s ongoing investigation.

Holland and Sumpter are charged with conspiracy to commit mail fraud for the kickback scheme, which carries a maximum sentence of 20 years in prison and a $250,000 criminal fine. The maximum fines may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum.

The pleas are the second and third to arise out of the department’s ongoing fraud investigation into the award of repair and maintenance contracts at facilities owned by MFA. On April 4, 2011, Edward T. Fodrey, a contractor and resident of Norfolk, Va., pleaded guilty in U.S. District Court in Norfolk to conspiring with others to steer contracts for repair, maintenance and renovation at MFA health care and nursing home facilities.

The investigation is being conducted by the Antitrust Division’s Philadelphia Field Office, the U.S. Attorney’s Office for the Western District of Virginia, the FBI in Roanoke, and the Internal Revenue Service-Criminal Investigation in Roanoke. Anyone with information concerning fraudulent behavior relating to the award of contracts by MFA should contact the Antitrust Division’s Philadelphia Field Office at 215-597-7405 or visit www.justice.gov/atr/contact/newcase.htm.